Publication: Catastrophic Health Expenditure on Private Sector Pharmaceuticals: A Cross-Sectional Analysis from the State of Odisha, India

Drugs constitute a large component of out of pocket spending on health.

Why does out of pocket expenditure remain high in India?

We assess variation in financial risk protection in Odisha, India. Our novel study is the first to investigate the in-depth role of the private sector—especially private chemist shops—in providing outpatient care and also contributing to financial hardship due to healthcare costs.


India has high rates of catastrophic health expenditure (CHE): 16% of Indian households incur CHE. To understand why CHE is so high, we conducted an in-depth analysis in the state of Odisha – a state with high rates of public sector facility use, reported eligibility for public insurance of 80%, and the provision of drugs for free in government-run facilities – yet with the second-highest rates of CHE across India (24%).


We collected household data in 2019 representative of the state of Odisha and captured extensive information about healthcare seeking, including the facility type, its sector (private or public), how much was spent out-of-pocket (OOP), and where drugs were obtained. We employ Shapley decomposition to attribute variation in CHE and other financial hardship metrics to characteristics of healthcare, controlling for health and social determinants.


We find that 36‧3% (95% Uncertainty Interval: 32‧7-40‧1) of explained variation in CHE is attributed to whether a private sector pharmacy was used and the number of drugs obtained. Of all outpatient visits, 13% are with a private sector chemist, a similar rate as public primary providers (15%). Insurance was used in just 6% of hospitalizations and its use explained just 0‧2% (0‧1-0‧4) of CHE overall. 86% of users of outpatient care obtained drugs from the private sector. We estimate that eliminating spending on private drugs would reduce CHE by 56% in Odisha.


The private sector for pharmaceuticals fulfills an essential health system function in Odisha – supplying drugs to the vast majority of patients. To improve financial risk protection in Odisha, the role currently fulfilled by private sector pharmacies must be considered alongside existing shortcomings in the public sector provision of drugs and the lack of outpatient care and drug coverage in public insurance programs.


  • Webinar: The role of private sector pharmacies in financial hardship in India: a health system analysis in the state of Odisha (August 24, 2022), held with the World Bank, Health Nutrition and Population; Health Financing Global Solutions Group; and Joint Learning Network. More info here.

  • Haakenstad, A., Kalita, A., Bose, B., Cooper, J. E., & Yip, W. (2022). Catastrophic Health Expenditure on Private Sector Pharmaceuticals: A Cross-Sectional Analysis from the State of Odisha, India. Health Policy and Planning.